In the excitement of purchasing a home, it's easy to forget the additional closing costs that come along with any real estate purchase. Closing costs in our local area typically run about 3% of the purchase price and are paid to lenders, attorneys and other third parties. Buyers often have additional costs related to their new mortgage loan.
Common closing costs for buyers:
- Closing Fee
- Title Insurance Fees (required when obtaining a mortgage)
- Loan processing fees
- DC Recordation Tax (1.45% unless buyer qualifies for lower rate of 1.1%)
- Escrow amounts for property taxes and homeowner's insurance
Common closing costs for sellers:
- DC Transfer Tax (1.45%)
- Mortgage payoff fees
- Title transfer fees
- Attorney fees for handling the closing
Are closing costs ever negotiable?
It depends. Some of those costs are charged by local government and cannot be negotiated. A seller sometimes agrees to pay part of the buyer's closing costs. This is something we can negotiate into the purchase agreement, depending on the market environment. Keep in mind, the home must appraise at the higher price if including closing costs so we must be prudent in making the decision to ask for a seller closing cost credit.
Is there any assistance for closing costs?
Check out this DC example below, based on a $1,000,000 purchase with 20% down (not including the downpayment):
Yes! Some lenders will allow you to roll the cost into your mortgage and/or provide you with a lender's closing cost credit. DC also offers down payment assistance programs for buyer who qualify. Often the biggest portion of your closing costs will be your down payment.
What do you recommend?
Whenever possible, it's best for the buyer to pay closing costs directly. In a competitive environment with multiple offers on properties, asking for a closing cost credit can lose you the home. In addition, many of the down payment assistance programs must be paid back eventually.
Reach out to us if you have any questions on closing costs. We're happy to provide you with a more detailed breakdown and recommendation based on your specific circumstances.